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African American Students and the CPA Exam

Mentoring, internships and scholarship programs can draw students into the profession.

BY QUINTON BOOKER

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EXECUTIVE SUMMARY

DESPITE DECADES OF EFFORT by
organizations such as the AICPA and NASBA to bring more
minority candidates into the profession, the numbers are still
small. Still, there were 5,731 African American candidates for
the CPA exam in 2002—the largest for any year since 1997.

THE DATA SUGGEST A SEVERE SHORTAGE
of African American males under age 25 holding
graduate degrees.

SINCE MANY STUDENTS DECIDE TO major
in accounting as early as high school, employers should
begin to build relationships with high school juniors and
seniors through summer job opportunities.

THE VAST MAJORITY OF CANDIDATES are
concentrated in 10 states. Employers in other states need to
be more creative in finding and hiring CPAs.

PROGRESS IS BEING MADE. Much of the
success can likely be attributed to mentoring, internship
and co-op programs, and scholarship programs at the
undergraduate, master’s and doctoral levels.

QUINTON BOOKER, CPA, DBA, is professor and
chairman of the department of accounting at Jackson State
University, Mississippi. His e-mail address is qbooker@jsums.edu .

he news is good—more African Americans than ever are
taking the CPA exam. But it could be better—the profession has a long
way to go before it is fully integrated. This article highlights the
performance of African Americans on the Uniform CPA Examinations for
2000, 2001 and 2002, using data extracted from candidate-supplied
questionnaires collected by the National Association of State Boards
of Accountancy (NASBA). We’ll look at the number of African Americans
sitting for and passing the exam to help determine how best to attract
minority students to the profession, and provide commentary on the
research results to help employers, accounting educators and
candidates adapt to the new computerized exam format.

THE NUMBERS There’s very little
hard evidence about the numbers of African Americans who are CPAs,
even after decades of effort by the AICPA (see “
AICPA Diversity Initiatives ”) and NASBA to bring more
minorities into the accounting profession. African Americans in 2000
made up 12% of the U.S. population, but only 5% of CPA exam
candidates. Fortunately the statistics for CPA candidates are
better-documented. An average of 2,598 African Americans—653
first-time and 1,945 repeat candidates—sat for each exam between 2000
and 2002 (see exhibit 1 ).

A Gap in
Representation African Americans make up 12% of the U.S. population,
but only about 5% of CPA exam candidates.

The data for 2000, 2001 and 2002 show no consistent trend for
first-time candidates. Comparing them with the 1997–1999 exams does
reveal a decline, however. The number of first-time African American
candidates fell sharply from 2000 to 2002—a worrisome trend. But the
total number of candidates rose steadily from 1997 to 2002, hitting a
new high of 5,731.

Commentary. About half the states that enacted
the 150-hour education requirement made it effective between 2000 and
2002; several of those states had significant numbers of African
American candidates. This may explain the decline in first-time
candidates. States typically have a bulge in the first-time category
before their 150-hour rule takes effect, since sitting prior to the
effective date allows candidates to be grandfathered in under
pre-150-hour rules.

A CLOSER LOOK AT THE CANDIDATES Sex. A majority of African American
candidates—between 62% and 65%—were female. While the percentage of
males did increase in November 2001 and all of 2002, females still
clearly dominated the African American candidate pool.

Age. The age of the candidate pool has been
fairly consistent over the six exams, with about half the candidates
less than 30 years of age ( exhibit 2 , below). Nearly
one-third of all candidates were in the 30–39 age group. The under-25
group, which includes recent college graduates, made up between 19%
and 24% of candidates on each exam.

* Percentages are based on
number of candidates in exhibit 1 who answered each
question. Numbers may not total 100% due to rounding.

Education. Three of every four African
American candidates—73% to 80%—held bachelor’s degrees only, though
40% had earned 150 or more semester hours of college credits. Many
candidates completed more accounting hours than the 24 to 30 hours
typically required for a bachelor’s degree; the majority completed 31
hours or more and about a third completed 37 or more.

Decision to study accounting. The data suggest
candidates decided to study accounting quite early (see exhibit 3
). More than half (52%) made their decisions by high school and
28% did so during their first two years of undergraduate school. Only
7% to 9% decided to study accounting after obtaining their
undergraduate degrees.

* Percentages are based on
number of candidates in exhibit 1 who answered each
question. Numbers may not total 100% due to rounding.

State origins. The majority of African
American candidates are concentrated in 10 states: California,
Georgia, Illinois, Maryland, New Jersey, New York, North Carolina,
Pennsylvania, Texas and Virginia, which account for nearly
three-fourths of all African American candidates ( exhibit 4
).

Commentary. The data suggest a severe shortage
of young (under age 25) African American males holding graduate
degrees, though candidates fitting that profile likely would command
above-average salaries. Several large CPA firms have been outstanding
in attracting new hires without graduate degrees by offering
specialized master’s degrees in conjunction with several major
universities; employers should note that offering tuition
reimbursement for graduate education helps attract African Americans.

Employers also could start to build relationships with would-be
African American CPAs as early as high school, when many candidates
make their career choices, by offering summer jobs to juniors and
seniors who have expressed an interest in accounting. Employers in
states other than the 10 where candidates are concentrated may need to
be more creative to attract a diverse employee base.

PASS RATES Five states allowed first-time candidates to sit for
fewer than all four subjects during the years we studied, so not all
candidates included in exhibit 5 completed all the exam
subjects. Over the three years studied, a total of 304 first-time
candidates passed all subjects attempted. Annual pass rates for
first-time candidates ranged from 5% in 2000 to 9% for 2001 and 2002.
The number and percentage of repeat candidates passing all parts
attempted were significantly better. The number of repeat candidates
passing all subjects attempted was 549 in 2000, 570 in 2001, and 753
in 2002 with annual passing rates of 15% to 17%. Pass rates of repeat
candidates were almost double—and, in 2000, triple—that of first
timers. A total of 2,176 candidates passed all subjects attempted over
the three years—an average of 725 candidates per year.

Commentary. The computerized CPA exam has
shifted much of the attention away from the statistics for passing all
four subjects during one exam administration. The exam now is
administered during four “exam windows” (two-month periods of testing)
each year. Most states allow candidates to sit for as few as one
subject per window, but once candidates sit for and pass one subject,
they must complete all remaining subjects within 18 months. Still, the
fact that more and more African American candidates are passing all
subjects they attempt is encouraging: 260 more candidates—43%
more—passed all subjects in 2002 than in 2000.

Average subject pass rates, ranked from highest to lowest, for
first-time candidates were: law and professional responsibilities
(LPR) about 22%, auditing (AUDIT) 18% and then either accounting and
reporting (ARE) or financial accounting and reporting (FARE) at about
13% each. For individual exam administration periods, the ARE pass
rates exceeded the FARE pass rates for three of the exams; the
opposite was true for the other three exams (see exhibit 6 ).
The highest first-time pass rate was on LPR in November 2001, 27%; the
lowest was on ARE in November 2000, 7%.

Subject pass rates for repeat candidates were much higher than those
for first-time candidates ( exhibit 7 ): law and professional
responsibilities (LPR) 28%, auditing (AUDIT) 24%, accounting and
reporting (ARE) 18% and financial accounting and reporting (FARE) 15%.
Pass rates for repeat candidates were consistently in double digits.
The highest repeat candidate pass rate was 31% for LPR in November
2002; the lowest was 13% on ARE in November 2000.

Commentary. Educators, employers and students
should note that persistence does pay off—as pass rates for repeat
candidates were higher than those for first-time candidates—and that
single-subject pass rates were significantly higher than rates for all
subjects. This point has strategic significance for candidates who may
now select the number of subject areas they attempt during an exam
window. Note that subject areas on the computerized exam have been
reconstituted and renamed, and new topics—such as a new business
environment and concepts subject area—are being tested.

THE LIMITS OF THE DATA The primary limitations of this study lie in its
data-gathering technique. With the exception of exam scores, data were
gathered through questionnaires provided to all African American
candidates; numbers therefore were self-reported. Since only
questionnaires of candidates who participated were considered, the
numbers may not be precise.

EMPLOYERS AND CANDIDATES TAKE NOTE This study shows that substantial numbers of African
Americans are taking the CPA exam, and participation and success rates
are on the rise. As many as 725 per year are passing the
exam—significant progress from 1989, when the total number of African
American CPAs in the United States was just 2,500. While two-thirds of
the candidates were female, the number of males is growing. Much of
the progress shown in the study can be attributed to mentoring,
internships and co-op programs and scholarship programs at the
undergraduate, master’s and doctoral levels. Still, the profession has
a long way to go before it is fully integrated in fact as well as in
the ideal.

Statistics from the AICPA’s 2004 study, The Supply of Accounting
Graduates and the Demand for Public Accounting Recruits,
confirm Dr. Booker’s findings. Even now, only 7% of CPAs employed
by accounting firms are minorities. While the problem is easy to
observe, finding a solution is much more complex. With a membership
base of over 340,000 CPAs, the Institute realizes that it takes 3,400
new CPAs to move the needle one percentage point. We need programs
that have a wide and deep impact into all communities of color. The
strategic programs the Institute has put together to address the
challenge of diversifying the accounting profession therefore address
several fronts, targeting high school and college students as well as
educators. Key AICPA programs include:

Advertising The “Be A Star in Business” and
“Start Here, Go Places” advertising campaigns connect print and
interactive advertising developed specifically to expose young people
of color to the accounting profession. (For more information see
www.aicpa.org/members/div/career/mini/be_star_business.htm .)

College Residency Programs Weeklong programs
expose minority high school students and their parents to
opportunities in accounting and other business careers. Students learn
accounting, business, and social skills while living on college
campuses. Since the program began in 1997, 25 programs have been
funded nationwide; 90% of them are operational today. (See
www.aicpa.org/members/div/career/mini/college_residency_program.htm.)

Minority Scholarship Program The AICPA has
awarded more than $6 million to 1,300 students in the past 10 years.
In 2004 students at 107 universities received 157 scholarships
totaling $488,000. Judged most likely to become CPAs, these students
earned overall and accounting GPAs averaging 3.80. (See
www.aicpa.org/members/div/career/mini/smas.htm .)

Accounting Scholars Leadership Workshop Two-day
workshops focus on leadership, team-building, communication and
presentation skills. They are designed to expose top college minority
accounting students to leaders in the profession and reinforce the
importance of the CPA designation. Over the past 10 years 800
undergraduate and graduate students have participated. (See
www.aicpa.org/members/div/career/mini/aslw.htm .)

The PhD Project This partnership of
forward-thinking corporations, led by KPMG, provides a critical
support system for PhD candidates during their doctoral programs and
creates a pipeline of potential professors of accounting and other
business disciplines. The program has doubled the number of minority
PhD’s in the classroom—and the number of role models for today’s
students.

Minority Doctoral Fellowships Leveraging the
efforts of the PhD project, the fellowships provide financial support
to minority PhD candidates studying accounting. Fifty-three recipients
of AICPA fellowships completed their PhD programs; 98% are teaching
accounting at the university level and 86% are accredited CPAs. This
year there are 18 PhD candidates in the pipeline. (See
www.aicpa.org/members/div/career/mini/fmds.htm .)

Strategic Partnerships The AICPA has developed
key partnerships with the Association of Latino Professionals in
Finance and Accounting (ALPFA), the National Association of Black
Accountants (NABA), the Diversity Pipeline Alliance, INROADS and the
National Academy Foundation to attract and support minority students
interested in pursuing a career in accounting.

If you are interested in helping bring the message of the AICPA or
your local state society to the high school or college classroom,
please go to the Academic and Career Development (ACD) Team Web site
at
www.aicpa.org/members/div/career/index.htm . To speak with a
manager about the programs, contact Daniel Hobson, manager, minority
initiatives, at dhobson@aicpa.org
or Jodi Ryan, manager, recruiting programs, at jryan@aicpa.org .

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